Former prime minister Paul Keating has called for a new “longevity levy” to support the growing number of Australians who will live between 80 and 100.

Mr Keating, the chief architect of compulsory superannuation, said the superannuation system had not kept pace with increased life expectancy. He said this meant a new national elderly insurance scheme – based on a levy of two to three per cent of wages – is needed to help pay for income support and aged care.

Former prime minister Paul Keating has advocated a national longevity levy to help support the increasing number of people living beyond 80. Photo: Andrew Meares

“You can't save under super for 30 years or 35 years and then live another 30 years off from it,” Mr Keating told the ABC’s Lateline program on Thursday night. “In other words, the pool can never be big enough to sustain you till your 90s.

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“So, we have to have, I believe, a Commonwealth insurance scheme for the 80 to 100s with a calibrated, precise product which guarantees people income support, aged care and aged accommodation.

“And it's possible to do. It's a classic insurance thing. It's like the houses in the street: you pay your insurance, but only one house burns down. What happens? One person dies earlier, but their work and savings subsidises other people who last into their late 90s."

Mr Keating said such a levy would ease pressure on the budget by reducing demand for the age pension.

His comments come as the Abbott government prepares to officially announce in Tuesday's budget that the pension age will rise to 70 in 2035.

Mr Keating predicted his “longevity levy” proposal would be opposed by Treasury.

“The Treasury hate tax expenditures,” he said. “The Treasury's a great department of state, but it has not a scintilla of imagination . . . there's antagonism in the Treasury to every tax expenditure that exists, including superannuation.”

Mr Keating urged the Abbott government to increase superannuation from 9.25 per cent of wages to 12 per cent of wages.

He said he did not support former Victorian premier Jeff Kennett’s call for a rise in the GST because this would disproportionately affect lower income earners.

Age discrimination commissioner Susan Ryan told ABC radio on Friday morning that a national elderly insurance scheme was a "good idea" but noted similar options exist in the private sector.

Aged care advocates have welcomed Mr Keating’s proposal, saying it would help protect thousands of low income earners who are unable to pay for adequate care.

A policy advisor with the Combined Pensioners and Superannuants Association of NSW, Amelia Christie, said the levy would act as an aged care ‘‘safety net’’, particularly for Australians who spend extended time out of the workforce.

‘‘We support a universal levy because it will help low-income earners, people with disabilities and women who take long periods off work to care for children. The assumption that everyone will be able to fund their own retirement is simply not true.’’

She said many aged care and aged accommodation facilities ‘‘are not up to scratch’’, and any move towards a user pay model would mean many people get inferior care.

‘‘Care fees account for about 85 per cent of the aged pension. It is putting an increasing burden on older people and their families. A longevity levy could help people stay in their homes, rather than move to high cost residential care.’’

The chief executive of the Council on the Ageing, Ian Yates, said while he welcomed the levy proposal, the government would be ‘‘reluctant’’ to pursue it.

‘‘It’s an idea worth looking at but historically when governments have been given the option to introduce contributory insurance schemes they haven’t done so. But it’s a welcome addition to the debate about longevity and how we resource that,’’ he said.

‘‘The more we can provide for people to stay at home we will save massively on nursing home beds which cost about $175 each day.’’